Questions raised over China's shale gas potential

China's ability to deliver on its shale gas production target of 6.5 billion cubic meters a year by 2015 has been called into question by global business analysts GlobalData.

Describing the production plan as "overly optimistic", due to the geological complexities of China's shale formations and pressure on water resources, a new report from GlobalData includes an extensive list of reasons why the country might fall short of its 2015 ambitions.

China is believed to have onshore shale gas reserves of 134.4 trillion cubic meters, resources which prompted the Chinese government to promise extensive research and development for shale gas technology, alongside measures to support and encourage investors.

However, both China's infrastructure and 'very different geology' are seen as major barriers to immediate progress.

The development of a domestic pipeline network, for example, is expected to take time and money, thereby slowing the pace of shale gas development. In addition, the Chinese authorities will be required to address the environmental issues associated with the industry.

"Water shortages are a major issue in China," said GlobalData, "yet hydraulic fracturing technology requires vast quantities of water and is claimed to contaminate waterways with the corrosive and toxic pollutant hydrogen sulfide, which Chinese shale gas contains in abundance.

"Sophisticated drilling and gas purifying technologies, and strict emission standards would be needed to save China from the corrosion of drilling equipment and air pollution."

Chinese state control over natural gas prices, keeping them artificially low, is also viewed as offering little incentive to developers, given the prospect of minimal profits.

The analysts' conclusion therefore is that industry remains uninspired by China's shale gas policies, especially on pricing, and that this threatens to remove any financial attraction from the sector.